Growing your business through acquisition can be one of the most rewarding and impactful events you will ever do in your career! Executed with the right company at a fair price, an acquisition could very well be one of the most lucrative steps you will ever make. Purchasing an entity that already has a track record and has demonstrated success and momentum can grow additional profits faster than any other approach.
An acquisition can create synergies of several varieties.
- Financial
- Enhanced products or services
- Human resources advances – beyond what could be accomplished with 100% organic talent additions.
Financial Synergies
By buying a “like kind” business, you can almost always grow your top line faster than your expenses.
The result: Higher profit margins and higher overall profitability!
Growth can be achieved organically as well, but an acquisition is a faster way to grow.
Most growth experts would advise a devoted effort to organic growth coupled with periodic acquisitions for a “burst” of additional growth.
Strategic Improvements
Often a step in your strategic plan can be accomplished with an acquisition. Given enough time, most companies can add products or services to fill out their plan for improved or expanded offerings, but by purchasing one or more companies, you can fill out important products that make your overall position in the marketplace more competitive.
For example, if you offer a suite of insurance products, it may be beneficial to add more insurance products, and/or expand your industry footprint. You may want to purchase a reinsurance division and acquire a company with a presence in new geographies.
Rollups
Many industries have either been formed or dramatically expanded by “industry rollups.” This involves buying up companies that are largely the same and expanding market share. Historical examples would be auto rental, airlines, petroleum refiners, and auto service.
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Acquisitions need to be done correctly. It can be a protracted process to do it right. Careful due diligence and negotiations are vital. It will likely cost 1-3 percent of the cost of the purchase price for the proper steps to ensure success. Hire a good advisor. Done properly, an acquisition is a tremendous way to grow and grow quickly.
